Maintenance of Books of Accounts By Specified and Notified Persons – Section 44AA Read With Rule 6F And Audit Under Section 44AB

Maintenance of Books of Accounts By Specified And Notified Persons – Section 44AA Read With Rule 6F And Audit Under Section 44AB

Article explains Provisions related to Maintenance of Books of Accounts under Income Tax Act, 1961 by Persons Carrying Out Specified Profession,  By Persons Carrying on Business and Non – Specified Profession Where Income Exceeds Rs.1,20,000/- Or Gross Receipts Exceed Rs. 10,00,000/ and by Category of Persons Carrying on Business and Non – Specified Profession. Article further explains provisions related to Compulsory Audit under Section 44AB and Due Date for Tax Audit of Accounts.

1. Maintenance of Books of Accounts

A. Category of Persons Carrying Out Specified Profession

According to Section 44AA read with Rule 6F Every person carrying on the following professions – Sub Rule 6F(1)

1. Legal

2. Medical

3. Engineering

4. Architecture

5. Accountancy

6. Technical Consultancy

7. Interior Decoration

8. or any other profession notified by the Board in the Official Gazette

shall keep such books of accounts as may enable the Assessing Officer to compute his Total Income in accordance with the provisions of the Income Tax Act, 1961. (even if his gross receipts do not exceed Rs.1,50,000/-).

Provided further that the persons carrying out the specified professions mentioned above are required to maintain such books of accounts as defined in Rule 6F(2) if their Gross Receipts exceed the threshold limit of Rs.1,50,000/- in any of the 3 years immediately preceding the previous year or where the business has been newly set up the total gross receipts are likely to exceed the threshold limit of Rs.1,50,000/-. However, the above-mentioned rule would not apply to specified professions if the gross receipts does not exceed Rs.1,50,000/- in any of the 3 immediately preceding years even if it exceeds the threshold limit in the other 2 years, Refer Case Law, A. Keshava Bhat v ITO (2001)

According to Rule 6F(1) the books of accounts required to be maintained under Rule 6F(2) are as follows:

a. Cash Book

b. Journal

c. Ledger

d. Carbon copies of Bills issued maintained serially

e. Payments or Bills issued to the assessee and where such bills are not issued and the payment does not exceed Rs.50/- payment vouchers prepared and duly signed by the person. Provided that where the cash book maintains adequate detail, the payment vouchers need not be prepared and signed by the person / assessee.

However, where gross receipts from the specified profession is within the threshold limit of Rs.1,50,000/- the requirement of maintaining such books of accounts does not arise but he has to maintain such books of accounts as would enable the Assessing officer to compute his total income.

B. Category of Persons Carrying on Business and Non – Specified Profession Where Income Exceeds Rs.1,20,000/- Or Gross Receipts Exceed Rs. 10,00,000/-

According to Section 44AA(2) where the person,

carries on any business or profession other than those profession covered under Section 44AA(1) and the income exceeds Rs.1,20,000/- or his total sales, turnover and gross receipts exceed Rs.10,00,000/- in any of the 3 years immediately preceding the relevant previous year

or

Where the business or non-specified profession is newly set up and the income is not likely to exceed Rs.1,20,000/- or the sales, turnover, gross receipts is not likely to exceed Rs.10,00,000/-,

shall maintain such books of accounts and other documents as would enable the Assessing Officer to compute his total income in accordance with the provisions of the Act.

Provided further that in case the ‘person’ is an individual or HUF the words Rs.2,50,000/- would be substituted for Rs1,20,000/- and Rs.25,00,000/- substituted for Rs.10,00,000/- in clause (i) and clause(ii) respectively.

Also, where the provisions of sub-section (4) of Section 44AD are applicable and the assessee’s total income exceeds the maximum amount not chargeable to tax in any previous year – such a person will be required to maintain such books of accounts as would enable the Assessing Officer to compute his total income.

Where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub- section (1).

C. Category of Persons Carrying on Business and Non – Specified Profession

According to Section 44AA(2) where the person,

carries on any business or profession other than those profession covered under Section 44AA(1) and the income does not exceed Rs.1,20,000/- or his total sales, turnover and gross receipts does not exceed Rs.10,00,000/- in any of the 3 years immediately preceding the relevant previous year then such a person is not required to maintain any books of accounts.

NB

Exceptions to the abovementioned Sections – Section 44AE, Section 44BB and Section 44BBB

2. Compulsory Income Tax Audit Under Section 44AB

According to Section 44AB –

Every person whose total sales, turnover or gross receipts of business exceeds Rs.1,00,00,000/- shall have to get his accounts audited compulsorily by a Chartered Accountant. – Section 44AB(a)

Every person carrying on profession whose total sales, turnover or gross receipts exceed Rs.50,00,000/- shall have to get his accounts audited by a Chartered Accountant. – Section 44AB(b)

Every person carrying on business or deemed to carry on business under Section 44AE, Section 44BB, Section 44BBB and if his profits and gains from business are lower than the amount deemed to be profits or gains from that business in that previous year shall have to get his accounts audited by a Chartered Accountant. – Section 44AB(c)

Every person carrying on profession under Section 44ADA claims that the profits and gains from that profession are lower than the amount deemed to be profits and gains from profession and his profit and gains from that profession exceeds the maximum amount not chargeable to tax in any previous year shall have to get his accounts audited by a Chartered Accountant. – Section 44AB(d)

Every person carrying on business under Section 44AD and the provisions of Section 44AD(4) are applicable to him and his profits and gains from business exceed the maximum amount not chargeable to tax in any previous year shall get his accounts audited by a Chartered Accountant. – Section 44AB(e)

Provided further that such a person who is required to get his accounts audited under any of the above sub – sections of Section 44AB shall get his accounts audited by the specified date and furnish the report of such audit by the specified date.

However the above-mentioned provisions shall not apply to such persons who declare profit and gains for the previous year in accordance with the provisions of Section 44AD(1) and his total sales, turnover and gross receipts do not exceed Rs.2,00,00,000/- in such previous year.

3. Due Date for Audit of Accounts

In case of person carrying on business or profession under any other law or statute such date as may be prescribed as the due date under such law or statute. The due date of furnishing return of income shall be in accordance with the provisions of Section 139(1). The Form to be used shall be Form 3CA and Form 3CD

In case of person carrying on business or profession other than those mentioned above – the due date of furnishing return of income under Section 139(1) and the Audit Report under Section 139(1). The Form to be used shall be Form 3CB and Form 3CD.